Product Management © 2013 Johan Oskarsson

Choosing the right path to achieve a company vision can be very tricky, even if all parts are known and the vision is stable. It’s even trickier when the vision is moving and the roadmap needs to change. Usually the tactical moves are interdependent and a change will have multiple consequences.

Portfolio Anatomy

Creating a vision for your company, business unit or product line involves laying out the bits of the puzzle in order, then choosing the right way forward. This is usually called a Roadmap. Roadmaps are great for figuring out your next steps and milestones. What’s harder to figure out is how all of your projects interact and how to coordinate many different projects into tactical launches. In creating an effective roadmap you must be able to anticipate shifts in the market, adapt when more knowledge is acquired, and understand and assess any risky assumptions contributing to the process. An effective roadmap includes all major projects and activities that you need to accomplish in order to reach a milestone or strategic vision. When changing your business model you usually need to start various projects in different areas of your organization. IS-IT, R&D, after market, suppliers, etc. These areas are sometimes not very well coordinated with each other, or have little insight into each others work. The different projects take different times to complete. Not only do you have to create new solutions but you have to maintain or withdraw others from the market. It is a combination of everything. One way to handle such a situation is to separate projects and activities and coordinate them from C-level management. I strongly believe that this is the wrong way.

Not only does the upper management become more distant from the different parts of the organization, the communication chasm between these parts becomes greater. Intercommunication diminishes. When the market is changing fast and competition emerges over night, organizations need to close communication chasms not widen them. Everything has to become more interactive and integrated, including planning. Many product solutions today are bundled and require that more people understand all internal relationships in order to create new solutions. It is no longer possible to assume that picking a system wide solution apart and managing each part alone makes anything any easier. It’s a common occurrence that a planning process faces deadlock, where one part is waiting for another to finish. This results from being unable to see and plan in interdependence, and can result in huge waste and lost opportunities. Endless meetings and discussions are unable to solve this dilemma. Resources are often reallocated between different projects in the hope of a fast solution to the problem. Adding more people late is a known bad, but a common action. What else can you do? More holistic tools are necessary to manage complex systems. Tools that visualize relationships help identify interdependence, giving you the complete picture and triggering creativity.

[patternlanguage.com]

“Drawings help people to work out intricate relationships between parts.”

Christopher Alexander

Manage complexity Planning and executing a strategy successfully is truly complex. Many i n t e r r e l a t i o n s h i p s a r e s o m e t i m e s unknowable in advance. Yet we tend to make long term plans and large tactical moves in the hope of staying competitive, a l l t h e w h i l e u n a b l e t o s e e t h e interdependent parts that need to fit together. When we have vision in sight we make a strategy to reach that vision. We start to execute the strategy when we start spending money on projects and activities. The biggest fallacy is that we think we can control the future with long-term plans. “The law of requisite complexity” states that an organization must be adequately complex as the environment it finds it self in. Meaning, for strategy and portfolio planning, that it must be able to handle all the changes and variations that it might encounter. We have a tendency to group things together in order to understand them. This is something we have been taught to do in order to handle variation and complexity. It is called attenuation, reduce complexity in order to understand the big picture. But in managing complexity an attenuator needs to be balanced with an amplifier in order to match the complexity of the surrounding environment. This means breaking groupings up into smaller parts which need to be managed to handle a fast changing market. A complex environment requires us to change our way of trying to control the future.

We are good at predicting the future, too good actually, so that we tend to forget that everything cannot be predicted. The way to handle complexity is to probe, sense and respond, compare to sense, analyze and respond again. In other words we should explore the near future (probe), acquire data from that exploration (sense) and then respond to that information. This contrasts with first gathering data, analyzing it and then responding. It is quite a different approach. The probe, sense and respond approach is exactly what, I believe, we have always wanted but been unable to use because of very long development cycles. Instead of making in depth market research and analysis on which to base long term plans for meeting market demands, we should make fast and cheap prototypes, test them in a safe to fail environment, get rapid feedback and then adapt according to the findings. By breaking elements of a portfolio into smaller pieces we can create the appropriate complexity needed to match both our external market’s and our internal organization’s complexity. It does not need to be broken into smaller parts than necessary to handle changes in the market, but still it is nice to be able to react fast. Nor is it recommended to break things down more than you can handle internally.

[lean-kanban.eu]

“Leaders who try to impose order in a complex context will fail, but those who set the stage, step back a bit, allow patterns to emerge, and determine which one are desirable will succeed.”

Dave Snowden, A leader’s framework for decision making

Visual Thinking When at a waypoint figuring out the next heading for a new product, portfolio or company mi lestone, we have t rouble understanding how all the bits and pieces will fit together. We tend to use tools for our verbal mind, forgetting about the visual mind which can help a great deal to make sense of problems. We can use pictures that encompass all relationships to complete a doubled sided mental approach. Albert Einstein didn’t say a word before he was two and half years old. His nanny called him stupid. As it turns out Albert Einstein didn’t think in words. Is he stupid? No, I assume it is safe to say, he was not. Some people are able to think more in words, some are able to think more in pictures (like me and Albert). To be able to make good strategic moves we need both. Visual Thinking is about utilizing the right side of our brain. Here are some key features of Visual Thinking. Capturing the big picture. By sketching out all elements of a portfolio you will see just the right amount of information. Enough to grasp the idea, yet not too many details to distract. Seeing relationships. Understanding the the way forward requires understanding the relations between elements. This is easier to express visually than in words. For example, when there is interdependence between two projects, a drawing can show why one of these projects should be split in two in order to bring a complete solution to the market faster.

Collective reference point. A picture can turn an implicit assumption into explicit information. This is very useful to enhance communication and visualize unknown risks. Shared language. A visual Portfolio Anatomy uses a shared visual language. It need not include words but is still a means for communication that provides a shared picture for how bits and pieces fit together. Joint understanding. By visualizing the entangled way forward, you can achieve a shared understanding between people from different parts of an organization. It is priceless as a tool for alignment. Idea trigger. Many times we are stuck with tunnel vision, unable to see new possibilities. In order to find new alternatives we can enable the creative process by understanding the whole. Play. A Portfolio Anatomy provides you with the opportunity to play. By simply adding, breaking, changing or removing elements you can be in the ‘sandbox’ until you have explored all the different possibilities. Don’t forget to have fun!

[danroam.com]

“We can learn to solve complex problem with simple pictures!”

Dan Roam, “The back of a napkin” & “Blah, blah, blah”

Design Attitude Everywhere we hear that the world is changing faster and faster, and with increasing uncertainty. Traditional incremental growth is challenged by disruptions that happen overnight. There is not always time to figure out what to design. We need to use Design Thinking, instead of thinking what to design. When talking about prototypes we usually tend to talk about them as they are close to the final product. Just a few modifications and we are there. The original thought is the same, the prototype is just for verifying the concept. This is very narrow minded and misses the discovery of new possibilities. By opening up to what we can learn from prototypes, we could change the whole initial idea to something much better than what we first intended. This is Design Thinking. Design something just to see if we trigger any new thoughts. The result of the design does not have to be a product intended to sell. The goal is new insight and learning. This process can replace traditional design. A new and scary concept for many, many people. So prototype instead of specify. Writing a specification with foresight is hard, almost impossible. Yet it is what we have done for far too long. This may be why it is hard to convince managers that making a prototype is the best way to figure out what should be done. If you spend too much time trying to figure out things in advance you are less likely to be flexible enough to adopt a better idea when it comes along. Design Thinking is a lot of things but three basics that I think (along with those who inspired me) are core to this process are; to face the real world frequently, see the whole, and rapid prototyping.

Meet the real world. To solve a real problem for someone, we have to understand, not only what they are doing right now, but what their unmet needs are. It is not certain that he or she knows what they need. To discover their real needs we have to visit the real world, meet and observe people in their daily life. System level. To create a solution for a problem usually involves people from different parts of an organization. To be able to communicate with people from different parts we need a framework that enables system level communication and models that can illustrate system wide interdependencies. Cheap, rapid prototyping. One of the best ways to reduce risk is to verify assumptions. By using simple, fast, cheap prototypes you can unveil risky assumptions. The lessons of a prototype can also make you change directions. Using prototypes like this helps you stay one step ahead. By adjusting to a design thinking mode you can make sure that you have a clear understanding of the real problem you intend to solve, aligning the way forward system wide and exploring the next step using cheap, rapid prototyping.

“Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.”

Steve Jobs

Portfolio Anatomy A portfolio anatomy is a visual aid for showing the relationships between the projects and activities in your portfolio. There are many types of anatomies which can help you visualize intricate relationships between parts. The concept has been used on many types of problem but mainly for visualizing different parts of a project. A Portfolio Anatomy can be used at the corporate level, with the entire portfolio, or with individual product line portfolios. It visualizes all parts as viewed from 30 000 ft. A Portfolio Anatomy will help you understand the big picture, including when and how to break dependencies between elements. A Portfolio Anatomy will help you align your tactical moves and make communication easier. It is not so much a replacement for other tools than a compliment. Many common portfolio tools use the verbal, logical part of our brain, like financial models, business proposals, etc. An Anatomy engages our visual side. It complements your tool set for solving the complex problem of coordinating many different projects. By breaking projects up into smaller projects and identifying interdependencies between them, they become easier to coordinate. When breaking a project down, you often end up with one part which is the platform/infrastructure/foundation and another part which is the value proposition. Normally these parts are aggregated in order to make the financial investment cut. The advantage with breaking the project apart is that the interdependent part can be executed earlier and then be available for the other parts of the project. This helps to avoid deadlocks.

Deadlocks usually result in workarounds and temporarily solutions which off course increase cost and delay time to market. When dependencies are broken and your flexibility increased, you can move into exploration mode, working iteratively with a rolling wave of exploration, adaptation and mass release. When all your projects were interdependent, there was little time for exploration, making your launch very risky. Imagine instead a rolling wave with an iteration period of 3 months. By using the Explore, Adapt and Produce sequence you can in the current iteration: explore what might be produced in six months time, adapt what you are producing in 3 months, according to exploration findings found in the last iteration, while producing the result of previous iterations now.

Explore

Adapt

Produce

Explore

Adapt

Produce

Adapt

The anatomy technique is not at all difficult and no specific tools are necessary, though there are special tools just for this exercise. The easiest way to describe it is probably with a case study; Meet Green Room Surfing.

Explore

Produce

The Greenroom Surfing story Greenroom Surfing is California based surfing brand. They have been selling surf equipment and clothing since 1990. They are not profitable and soon face downsizing if sales don’t improve. There is a real crisis in this fictive company. The surfing equipment and clothing business is fiercely competitive and all brands are competing for approximately the same customers. That is anyone who surfs, wants to surf, wants to be regarded as a surfer and those who just like their T-shirts. The company has seen a negative trend over the last 5 years and is now facing downsizing. The board of directors still has one last hope. One of the employees, Ben, has an idea. Bens’ idea is a new business model where the company should shift from selling to just about anyone, to focusing exclusively on people who really surf. While surfers are not known to be rich, since they travel frequently and tend to prioritize waves over work, they will pay a premium for functionality, quality and durability. Another idea Ben has relates to the problems surfers have bringing surfboards when travelling. It can be ridiculously expensive, the boards can get broken and every other traveler you meet seams to hate you (it’s true!). Bens’ idea is that instead of bringing them on the airplane, you ship them using a service provided by the Green People Club. You bring the boards to your closest Greenroom Surfing retail store where you live, they will ship them to your travel destination and you pick it up at either a Greenroom retail store or partnered company when you arrive at your destination.

Current Business Model Ben calls it the “Flip Side” service. This service is something new for the industry and will help help boost Greenrooms brand as a pure surfer brand. Surfers will also get exposed to Greenroom Surfing retail stores and possibly buy things they need while traveling. Some might even buy a new custom shaped board. A possible cost reduction has also been identified. Instead of owning their warehouses, there is a new business utilizing a dynamic warehouse model where warehouse space can be rented as a service. This way Greenroom only has to rent the space they need. By changing the strategy to this new business model, Greenroom Surfing can move away from competition with mass produced products with super low margins. Instead they will focus on only on functional quality products where their margins are higher. They will also lower the cost by use of the new dynamic warehouse service.

The board have decided to go with the new business model and also add an environmental factor. They will reduce non-environmentally friendly material usage as much as possible. Greenroom Surfing is now launching a vision statement, lead by Ben who came up with the new strategy. “We believe that surfers not only want good functional products but also highest quality, produced with minimum effect on the environment.”

New Business Model

The new strategy leads to many new projects. During the program planning new ideas are popping up, from asset saving projects to new products. However Greenroom don’t have enough time or money to do all of the projects identified. The reality is they need some short-term revenue to avoid bankruptcy. Ben and his team is asked to cut the time plan, and costs, in half. The biggest problem is that it seems all projects need to be done before the new strategy is effective.

Projects Prio

Phase-out of old suppliers & phase-in of new

1

Kill own warehouse system & integrate to external 3:rd part warehouse

1

Flip Side Service 1

Update Product Design System 1

Update B2B Order system 1

Update PLM system 1

Update CMS system 1

Greenroom.com 2.0 update and new layout

1

Update return order system 1

Green People Club 1

IT projects needed to launch the new business model

Greenroom Surfing IT architecture

Looking at this Portfolio Anatomy some projects can be started simultaneously and some can be postponed for later. But it is status quo for the business model. Ben and some creative people spend the evening trying to figure out another way. What they discover is that almost all of the projects can be broken up into smaller projects. Ben also creates an alternative launch strategy.

The management team is asked to prioritize projects, since they cannot all be started and run at the same time. The management team has not been able to prioritize since all projects are needed. All are musts. During the first planning phase Ann, one if the project leaders, has found a tool to visualize dependencies between projects and to plan possible combinations. Below is her first prototype of a Portfolio Anatomy. She demonstrates it in the hope of finding a way to coordinate projects and move toward the new strategy, at least far enough so they can launch something that can change their current fate.

First round portfolio anatomy

Bens’ alternative launch strategy is a more iterative and, after a couple of hours bending and twisting, looks less risky but is still profitable. Ben split the launch up in iterations. In the first iteration Ben plans to phase out the low margin products. He also phases in the new suppliers of organic environmentally friendly material and the integration with the 3rd party external warehouse system. This way they lower costs significantly and turn the immediate cash-flow problem from critical to manageable.

In the second iteration they plan to phase in the new environmentally friendly products as well as launch the real surfer compliant products. They will finish the transition to dynamic warehousing and make an update on the current website with the new products. In the last iteration they plan to phase out non-environmentally friendly products, phase out old suppliers, start the Green People Club and start the Flip Side service. New new business strategy is finalized with a new layout on the website.

Second round portfolio anatomy

Ok, what’s next? In theory this is easy. Not so easy in reality but you have to start somewhere. If you don’t know where you are going a Business Model might be the first step. When the end of the road is clear then it is time to find the way. The Greenroom case only illustrates the simplest way of using a Portfolio Anatomy. As you start using it you will discover other benefits. You can easily add other activities such as knowledge acquisition, organizational changes etc, as important elements. Working with a Portfolio Anatomy is not a one time event, its is an ongoing planning activity and is part of the Agile Product Management Framework ©. This planning activity is a great complement to Business Generation Modeling, Portfolio Alignment, and Project Decision-making. By visualizing the portfolio elements it tends to effect the decision-making process. This is a good thing!

Guiding steps 1. Understand your Business Model strategy 2. Identify all that must happen to realize this strategy 3. Visualize these elements in the portfolio of projects, assets and activities 4. Align the strategy with the whole organization 5. Decide in which order projects and activities should come 6. Use internal competence to creatively explore new ways forward that might help speed things up 7. Review and adapt on regular basis, minimum 3-6 months

Johan Oskarsson

@johanoskarsson

www.captaintrouble.com Inspirational sources Management 3.0 – Jurgen Appelo The Product Manager’s desk reference – Steven Haines Business Model Generation – Alexander Osterwalder A leader’s framework for decision making - Dave Snowden The back of a napkin & “Blah, blah, blah” - Dan Roam Steve Jobs - Walter Isaacson

Thanks to David Jackson for editing and theoretical dialogues.